I know, 2020 isn’t even over yet. But I think ahead to my ISA every year. I just worked out that, based on the UK stock market’s long-term history, investing just £100 per week could net me £73,400 over the next 10 years. Or as much as £213,000 over 20. But what are the best shares for me to buy to achieve that kind of result? I already have a good start to my list.
ISA: the best shares to buy?
First up is City of London Investment Trust. I invest in my ISA mostly for dividends, and I like the way investment trusts deal with them. By taking a long-term approach, they can hold back the cash during better years to keep the dividends going during leaner times. And, wow, is City of London good at that! Along with Bankers Investment Trust, City of London has raised its dividend every year for 53 consecutive years. And the 2020 dividend provided a yield of 5.6%. Could be one of my all-time best shares to buy.
For my second choice I’m going for a growth stock, Boohoo. I’ve seen shares in the online fashion retailer rise and fall, sometimes sharply, over the past few years. By mid-March, Boohoo shares were down 45% in the crash. Just three months later, they were 35% up year-to-date. Opportunity missed again? Well, after a couple more big swings down and up, I’m looking at just a 1.5% gain in 2020. As long-term growth opportunities go, I think Boohoo is one of the best shares to buy now, with a view to topping up on future dips.
Time for a recovery stock?
I’m always wary of recovery stocks, preferring to wait until I see enough positive signs before I risk any cash. But right now, I like the look of Royal Mail Group. It’s just recorded an expected huge first-half loss, but the signs are looking ever better to me. Parcel revenue overtook letter revenue for the first time ever, union talks are progressing, and restructuring is going well. There’s still risk here, but I think it should be significantly reduced by 2021 ISA time.
On my list I also have another of my all-time best shares to buy, Unilever. I’ve watched over the years, but never bought. I’ve been looking for oversold bargains instead, stocks with potential but temporarily low valuations. Unilever has never met those criteria, always commanding a premium valuation. But all the time, the Unilever share price has kept growing. And progressive dividends have kept rolling in. I think my 2021 ISA will finally be my first to hold Unilever shares.
Rebased dividend plus growth
My fifth choice is Vodafone. I would never touch Vodafone in the bad days when it was paying high dividends that it just couldn’t afford, while carrying huge debt. Much of the debt is still there, but the dividend has been drastically cut now. We’re still looking at an uncovered dividend this year, mind. But 5G is coming on well, Vodafone is finally looking like it has a joined-up strategy, and forecasts indicate strong growth ahead. I think 2021 could be my year to buy.
I still have plenty of time to change my mind, but right now I think these are my five best shares to buy for my 2021 ISA.
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Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended boohoo group and Unilever. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.